Bitcoin
Bitcoin surges today with speculation Meme Mania is back
The surge in meme stocks today has some investors taking a closer look at the digital asset space.
It’s been an incredible day for high-risk assets, with speculators clearly returning to various meme stocks and cryptocurrencies similar in style today. For Bitcoin (Bitcoin 1.97%), a 2.5% move in 24 hours may seem like small potatoes given what is happening in the market today. GameStop (GME 74.40%) shares rose more than 70% this afternoon, with Reddit (RDDT 8.71%) seeing its share price rise by around 10% as well, with the return of Keith Kill (“Roaring Kitty”) to social media. The meme craze we all thought was dead may have just gone on hiatus.
We’ll see. The post that is driving speculators back into the market shows a man leaning forward in his chair, with many anticipating that this could mean that Roaring Kitty is considering adding a position (or has already done so). Its previous timing of moves in GameStop, which has aligned with speculative rises in other high-risk assets such as cryptocurrencies, could mean that there are now the right catalysts present to create a surge in demand for these assets, driving prices higher in the short term. .
Let’s dive into what to make of this news and another important catalyst for Bitcoin that many are paying close attention to.
Mememania is big business for speculators
Bitcoin’s daily movement has been quite orderly and certainly much quieter than many thought would be the case given this news. The issue is that Bitcoin’s status as a store of value and hedge for big money managers means that these headlines don’t mean much to those with the kind of capital to move the price of this token.
Given Bitcoin’s size and current market capitalization, it is also true that greater amounts of capital are needed to flow into this token to see the kind of appreciation that many expect to see in the world’s largest cryptocurrency. However, calls for $1 million in Bitcoin are now proliferating, with Jack Dorsey among the top executives ringing the bell with that number. Your recent announcement what Block (SQUARE -2.20%) will employ about 10% of the company’s cash flow to acquire Bitcoin every month, providing another demand catalyst for Bitcoin that investors are clearly banking on.
Now, the question is whether this increased demand from retail investors and speculators, in combination with the already strong demand from corporate and institutional investors, could be enough to stimulate Bitcoin’s next rally into the six- or seven-figure range.
It’s a game of supply and demand
I certainly think Bitcoin has moved beyond the speculation stage. Those betting on a rise to a target price of, say, $1 million will likely consider it to be a long and arduous road to that level. Of course, historically speaking, this has not been the case. There are many reasons to believe that if history proves to be our guide once again (in terms of post-halving moves), Bitcoin could perform excellently in the near term. But I think it’s also becoming increasingly clear that seeing the market capitalization of any asset increase by trillions of dollars is going to require a very sharp increase in demand.
The new supply of Bitcoin has become increasingly limited and there are certainly retail, corporate and institutional investors who have reason to continue adding Bitcoin during this point in the cycle. However, I think it will be important for investors to take a balanced approach to growing this token over time. Dollar-cost averaging these assets over time, as Block executive Dorsey reportedly hopes to do, may be the best course of action.
Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin and Block. The motley fool has a disclosure policy.